Kikwete sacks his Central Bank Governor over Corruption

President Jakaya Kikwete yesterday fired the Governor of Bank of Tanzania (BOT), Daudi Balali, after an audit investigation uncovered fraudulent transactions involving the repayment of the country’s external debt.

A press release from Ikulu (State House) stated that “the president has been deeply angered and disappointed with what has happened” at the central bank, and acted to “revoke” Balali’s appointment after he received a damning audit report prepared by the global accounting firm, Ernest and Young, that revealed more than $116 million had been improperly paid to 22 firms through BOT’s external payment arrears account (EPA) in one financial year alone.

The EPA account was originally set-up the Government to help service balance of payment, whereby local importers would pay into the account in local currency and foreign service providers would then be paid back by BOT in foreign currency. However, due to poor foreign currency availability in 1980s and 1990s, the debt within the account ballooned to $677 million by year 1999. Efforts under Debt Buyback Scheme and cancellations negotiated under Paris Club helped to reduce the debt level to $233 million in 2004.

Despite these efforts, unscrupulous officials and businesses were able to take advantage of one of the plans devised to reduce the account debt, whereby a creditor could endorse debt repayment to a third party. The audit report, sanctioned by the Government’s Controller and Auditor General (CAG) covering Bank of Tanzania’s 2005/2006 financial books, revealed that 13 companies used falsified records and claimed third party status and received BOT payments, while 9 companies couldn’t substantiate payments they received. Among these, 2 companies were not even registered by BRELA – Business Registrations and Licencing Agency. These companies are owned and operated by some of the most prominent business people in Tanzania.

Daudi Balali has been Governor since 1998. The President replaced Balali with one of his two deputies, Prof. Beno Ndulu, who before joining BOT was a senior official at World Bank offices in Tanzania and lectured at the University of Dar es Salaam. Recent media reports claimed that Balali, (who has been out of the country for a couple of months now since the investigation started — reportedly in Boston, USA for medical reasons), had written a letter of resignation, but no one in the Government was ready to confirm receipt of the letter, even after some newspapers published its entire contents.

In his most brutal crackdown on corruption ever since he came to office in 2005, President Kikwete also directed the Attorney General, the Inspector General of Police and the Director of anti-corruption bureau to take appropriate legal steps to bring to justice all the individuals and companies implicated in the EPA scandal. He also directed the Board of Directors of the central bank to study the report and take appropriate reprimand actions to all Bank officials involved in the scandal.

The scandal started after Controller and Auditor General (CAG) finished its annual auditing of BOT books in August of 2005. Following a public outcry that was echoed by the Bunge (National Parliament) and the IMF over the findings, the President and CAG ordered an external investigation conducted by Ernest and Young from September to December of last year. The public had been eagerly waiting for the contents of the audit report to be made public. It is still unclear if there will be investigations of BOT accounts in years prior to 2005/2006. Concurrently, Bank of Tanzania has been dogged by another investigation over the inflated cost of constructing the Bank’s headquarters, the Dar es Salaam’s 20 storey Twin Towers pictured above, which cost $25.48 million according to Group Five construction company).

What are your thoughts on this scandal and the way President Kikwete has reacted to the report? What do you think should be Balali’s fate? Should he be arrested and put to jail? Who else would you like to see taken to task? Please leave your comments.

The businesses cited in the audit should be published in the newspapers. Naming and shaming might be a way to curb illegal practices and corruption and for the public to boycott the businesses. Any chance of getting a list of these businesses?

The 22 businesses were indeed listed in the State House’s press release and widely published in newspapers. Names of individuals behind the companies have also began to emerge.

For example, The “EastAfrican” newspaper wrote:

The government said that more than $133 million was improperly paid to 22 local firms through the Bank of Tanzania EPA account during the period 2005/06.

According to special audit findings, 13 out of the 22 firms were paid $90 million by using forged documents. These include Bencon International Ltd, VB & Associates, Bina Resorts, Venus Hotel and Njake Hotel & Tours Ltd.

A further nine firms received $42 million for which there was no documentation of why they were paid. These were G&T International, Excellent Services Ltd, Mibale Farm, Liquidity Service Ltd, Clayton Marketing, Rashtas Ltd, Malegesi Law Chambers, Kiloloma and Brothers and Karnel Ltd.

The audit further revealed that two companies’ registration documents were missing from the Business Registration and Licensing Authority. These were Rashtas (T) Ltd and G&T International.

The great enemies of modern progress in Bongoland are evidently not only the Western institutions like the WBG but also the elected leaders,members of contituencies,ministers,government officials,judges, and lawyers who are corrupt.

One great example of corrupt lawyers is advocate Mkono whose involvement with Bank M, BOT,parliament,high profile cases, and women is nothing but shame to the nation. There are so many Mkono’s, he is just a classic example of very corrupt people who benefits from the weak system. By analyzing the success of influencial people like him and his firm you will understand why it would take longer for people to enjoy the matunda ya uhuru after Mkoloni was kicked in the butt. Bado kuna ukoloni mambo leo na matokeo yake ni Balali Scandal.How could he do all that by himself? Obviously he was not alone.

Todays’s rulers avoid the truth and the system is so unjust in punishing wrongdoers. Poeple like Mkono, Mahalu,Mkapa,Balali,Mramba,Kikwete should have been in jail for what they did to their fellow countrymen. That is just a small sample of people who sabotage the economy through the government and elected positions. There is no true fighters for the people and there is too much individualism in the political elites. A classic example is ANBEN and FOSNIK companies. ANBEN stands for Anna and Benjamin Mkapa and FOSNIK stands for Foster and Nicholas Mkapa. Leaders care for wealth of their children and their families at the expense of Wananchi’s trust. This a big big problem in post colonial Africa. Tanzania has classic examples of wealth societies created through abuse of power and trust. There is a conflict of interests. Mkono has assisted corrupt Asian communities to establish businesses and he had the audacity to team up with corrupt and criniminal to form a bank. The BOT should feel shame for giving a license to bank M. We hope the new governor will review their applications and revoke the license for conducting banking activities. We don’t want to see the collapse of the banking industry in Bongoland. The BOT has a big mess to clean and it has to dig deeply.

[…] demands the release of names of people involved in the scandal and their immediate prosecution. The EPA scandal consists of fraudulent payment of about TSh133 billion ($116 million) made by the Bank of Tanzania to 22 companies in the financial […]

[…] business, as well as to the country it is located in, in the current corruption cases involving the Bank of Tanzania are being uncovered. Not only have foreign investors removed their business from the bank, but from […]

Tanzania has classic examples of wealth societies created through abuse of power and trust. There is a conflict of interests. Mkono has assisted corrupt Asian communities to establish businesses and he had the audacity to team up with corrupt and criniminal to form a bank.3d design

To me i dont think if we still need to proove that there are some leaders who pretend to be good once while they are not. What has the president done is the something heroically he deserves to be cogratulated.